MrFoolish wrote:Let me ask, has anyone encountered a corporate action that it would have been seriously, and knowingly, disadvantageous to have ignored? (I don't mean unlucky to have ignored, in that you could have subscribed for more shares and they later went up in value.)
As far as it being
knowingly disadvantageous to ignore them is concerned, "open offers" are the main type that springs to mind. They're like rights issues, except that in place of the company issuing separately tradeable "rights" to subscribe for new shares, it issues "entitlements" to subscribe for them. If you don't want to subscribe, you cannot sell your entitlements to anyone else, nor in most cases (*) do you get any monetary compensation for them from the company. The entitlements generally allow one to acquire shares at a discount to the market price (**) and so not using them is generally disadvantageous. In particular, even if one doesn't want any more of the shares concerned, one could subscribe to one's entitlements and near-simultaneously sell the same number of one's existing shares (of course first checking that the net profit from selling at market price and subscribing at subscription price will be enough to pay the selling commission).
As a rough example, Greencoat UK Wind's (UKW's) recent open offer was on a 1-entitlement-per-13-shares basis, with a subscription price of 132p per entitlement, and the prevailing selling share price during the open offer was around 133-134p per share. Anyone with 1000 entitlements could have subscribed to them for a total of £1,320, sold 1000 existing shares (***) for say £1,335 minus say a £10 selling commission and ended up with the same holding and £5 more cash than if they'd done nothing, making doing nothing a known-to-be-disadvantageous option.
Of course, 1000 entitlements would have meant a holding of 13000 UKW shares, worth around £17k, so that particular example meets your "knowingly" requirement, but almost certainly not your "seriously" requirement! I'm pretty sure that examples of open offers exist for which doing nothing would have been more seriously disadvantageous than that, but have little idea how much more seriously disadvantageous they can get in practice - so basically, I'm just indicating that if I wanted to make a proper search for corporate actions it would have been "seriously and knowingly disadvantageous" to ignore, I would choose open offers as the place to start looking.
Incidentally, I'm fairly certain that at some point in the past, I pointed out that HYP1 had such an opportunity to extract a small risk-free profit from an open offer, and that pyad replied to the effect that it simply wasn't the sort of thing HYP1 does. No idea when that happened or which of HYP1's constituents was involved, though.
(*) I have known one exception to that, namely Lloyds' "compensatory open offer" in mid-2009, in which one couldn't sell the entitlements, but those who let them lapse got a "lapsed entitlements" payment from the company, determined in the same way as the "lapsed rights" payment is in a rights issue.
(**) As with rights issues, the subscription price is always at a discount to the prevailing share price at the time the corporate action is announced - but (except in the case of "compensatory open offers") subscribing
only involves paying the subscription price, not also giving up the proceeds of selling the rights or the "lapsed rights" payment. Also as for rights issues, subscription prices for open offers are generally set at a sufficient discount to that prevailing share price that the share price is very unlikely to fall below the subscription price during the subscription period (if it were to do so, the fundraising by the company would fail because anyone wanting more shares would buy them on the market rather than subscribing for them).
(***) After November 11th to avoid missing out on a dividend.
Edit:
88V8 wrote:... I recall at least one rights issue where there was no cash option for unsold rights.
Are you certain it wasn't an "open offer" rather than a "rights issue"? Announcements of open offers often look very much like announcements of rights issues, and I know that until I'd really got the differences sorted out in my mind (which took many years), I basically thought of them as two rather inexplicably different names for the same sort of corporate action.
Gengulphus